RBI fears inflation could go up by 100 basis points as an outcome of 7CPC

A total of 48 lakh Central government employees are waiting for more than five months to see the adjustment of their minimum pay and fitment factor demand to go beyond the 7th Pay Commission recommendation.

These employees are expecting that the National Anomaly Committee (NAC), which is going to present report on December 15, 2017, would come with some good news for them. However, they will have to wait to see their minimum pay hike in reality.

According to reports, the 22-member committee may not suggest a hike in minimum pay beyond the 7CPC recommendation as the matter does not come under the term "anomaly".

In a letter to Shiv Gopal Mishra, Secretary of Staff Side, the NAC, reportedly stated that the demand for increase in minimum pay and fitment formula does not appear to be treated as an anomaly, therefore, these do not come under the purview of the committee.

“The high level committee has not yet been constituted. The National Anomaly Committee (NAC) has also not discussed pay hike agenda even though staff Side has repeatedly demanded discussion and settlement as per the assurance given by Union Finance Minister,” said a report published in The Sen Times quoting a central government employee.

Union Cabinet on June 28, among many recommendations under the 7CPC, had approved raising the minimum pay from Rs 7,000 to Rs 18,000 per month and fitment factor to 2.57 times.

However, the employees expressed their dissatisfaction over the recommendations and urged the government to raise minimum pay from Rs 18,000 to Rs 26,000 and fitment factors to 3.68 times under 7CPC.

Taking their view into consideration, the NAC will reportedly recommend minimum pay hike to Rs 21,000 from existing recommendation of Rs 18,000 and fitment factor to 3.00 times from existing 2.57 times.

The finance ministry sources have already indicated that pay hike is absolutely necessary to keep up with inflation.

The delay in decision has made government unions restless which is why as many as 10 central trade unions recently in November called for a three-day strike in front of Parliament.

Meanwhile, the Reserve Bank of India continues to fear that rising consumer prices will threaten the central bank's inflation target of 4% which led the monetary policy committee (MPC) to vote for status quo in the October 2017 policy.

Among other reasons RBI was fearing for higher inflation, one was related to allowances under 7CPC. The central bank on October 07, reportedly said, "States’ implementation of the salary and allowances award is not yet considered in the baseline projection; an increase by States similar to that by the Centre could push up headline inflation by about 100 basis points above the baseline over 18-24 months, a statistical effect that could have potential second round effects."